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Blockchain and Smart Contracts

  1. 1. Blockchain and Smart Contracts: Not Smart, Not Contracts Blockchain and Civic Tech Roundtable: Smart Contracts 2.0 Presented by Nelson M. Rosario June 27, 2017
  2. 2. Agenda 1. Blockchain 2. Smart Contracts 3. Legal Considerations | 2
  3. 3. Blockchains Or distributed ledgers if you prefer
  4. 4. 1. Blockchain | 4 Generally, what are blockchains? • A technology that guarantees trust and consensus on a distributed and decentralized network • More particularly, a blockchain is typically a tamper-evident append only ledger of transactions consisting of cryptographically linked blocks of transactions • Differences exist depending on particular characteristics of the blockchain – Participation (e.g. Permissionless v. permissioned) – Consensus (e.g. Proof of Work v. proof of stake) – Incentives (e.g. Tokenized v. tokenless)
  5. 5. 1. Blockchain | 5 Use cases for blockchain technology abound: • Potentially any situation that can benefit from cryptographically linked time- stamped data that needs to be tamper-evident • Multiple private consortiums, and governmental initiatives have been created: e.g. Illinois Blockchain Initiative, Enterprise Ethereum Alliance Governmental Private Voter registration Peer-to-peer transactions Business licensing Supply chain management Digital identity Internet of Things
  6. 6. Smart Contracts Really more like smart agreements, but I digress
  7. 7. 2. Smart Contracts | 7 First, what is a contract? • “A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” – Restatement (Second) of Contracts § 1 • Agreement between two consenting parties that will be recognized as legally binding • Legal enforcement of promises • Assuming two parties capable of consenting to legal and reasonable terms – Typical formulation: Offer + Acceptance + Consideration = Contract
  8. 8. 2. Smart Contracts | 8 Generally, what are smart contracts? • The end of lawyers – Probably not • Scripts that execute automatically • Distributed and decentralized public agreements • They have some important properties – Transparent to participants in the network – No middlemen – Executed by the network – They can hold balances of tokens
  9. 9. Legal Considerations Lawyers, like life, find a way
  10. 10. 3. Legal Considerations | 10 General legal concerns: • Liability is unclear – When a smart contract breaks, who is liable? The drafter? The network? • No smart contracts have been litigated, yet • Enforcement is unclear – If the contract does not perform as anticipated how can the contract be enforced? • Jurisdictional recognition is unclear – The smart contract is decentralized, people and companies are not decentralized • How is data input into the blockchain validated?
  11. 11. 3. Legal Considerations | 11 Concerns for Civic Tech: • Who controls/administers a Civic Tech blockchain? A Civic Tech smart contract? • How can you ensure equitable access for all citizens to any Civic Tech blockchain?
  12. 12. Thank you © 2017 Marshall, Gerstein & Borun LLP. All rights reserved. This presentation is intended to be informative and should not be construed as legal advice for any specific fact situation. Readers/viewers should not act upon the information presented without consulting professional legal counsel.